A Toxic Culture - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 17 March 2012
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- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
Earlier this week, an interesting article came out by a former Goldman Sachs employee Greg Smith, entitled "Why I am Leaving Goldman Sachs". He spoke about how the culture at the bank had changed over the years. When he first joined the company, the culture was strong, and focused on making money in the long run by staying focused on serving their clients as best as possible.

In later years, the culture changed to making money at the expense of clients. The bank would try and sell stocks or investments to clients that they believed had low money making potential, so they could get it off their own books and onto the clients books, and earn a handsome fee in return.

While this kind of behavior may earn more money in the short run, it is clearly detrimental in the long run. It is like a shop that sells faulty goods rather than high quality products. In the short term, they save money by selling faulty goods and earn greater profits. In the long term, they customers don't come back, and they will end up with much greater losses.

---------------------------- Raise your voice before this turns into yet another scam! ----------------------------

When millions don't even have food to eat, our government is thinking about bailing out multi-millionaire CEOs!

Is this government really made up of our representatives or is it on the payroll of those corporate giants?

We at Equitymaster feel strongly about this cause, and thus have started an Urgent Poll where you can read all about this and cast your vote to make your voice be heard!

We strongly recommend every Indian, who wants to make a change, to take a look at this.

Click Here to read more and cast your Vote... Before it's too late!

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The subprime mortgage crisis in 2007-08 is a great example of this behavior. Banks sold high interest rate mortgages to low income people in exchange for a quick profit, knowing that they would likely default on the debt. Ultimately, this caused a financial crash, crisis, global recession, which is still continuing today.

In large part, much of the economic problems in the world are a consequence of a toxic culture. This toxic culture places greater importance on short-term profits and the expense of long-term profits. Short-term profits are created at the expense of a company's clients. Long-term profits arise only when a company acts in its client's best interests.

Many of the corruption problems in India can be explained in the same way. Corruption can create short-term benefit for those involved in the corruption, but as we know has very detrimental effects in the long term. Reducing corruption requires a change in culture and mindset, much like what the finance industry also needs.

Obviously there are many factors that caused the global financial crisis and the economic issues that exist today. These include poor regulations and governance. But this toxic culture is also a big part of it. As in the Goldman Sachs article, it was this toxic culture that encouraged Goldman employees to sell things to clients that they did not need, or were detrimental to them. A change in this mindset would go a long way in helping us to solve many economic problems today.

is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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5 Responses to "A Toxic Culture"

senthilkumar.s

Mar 18, 2012

In india, the same kind of attitude prevails in some financial institutions and commercial extablishments. All will agree that corruption should be eradicated from our system. But for that,paradigm change should happen at micro level. Every Individual should take pledge that he/she will not give/accept/facilitate bribes.

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Kuldeep Nayar

Mar 18, 2012

The cultural change required can be summed up in a single sentence, "Just do your job honestly, sincerely, and to the best of your ability." If this attitudinal change can be brought about in India amongst the majority ... corruption cannot survive. Remembet a team wins when its members do their job.

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Shayin C K

Mar 17, 2012

I think each of us should stick to what we are doing and do it well. Equitymaster itself is an example of a "non-toxic" culture, and they are succeeding, albeit slowly. This proves that "middle and poor citizenry" do not need rescuing, just enough clean alternatives. With several more equitymaster type institutions(by type I mean the values, not business) coming up, I am sure things will improve for the better. A "non-toxic" culture succeeds in the ling run.

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rajiv

Mar 17, 2012

what Goldman and am sure all other big banks of US, Europe & Japan hv done and still doing is also CORRUPTION. Unfortunately, most Indian politicians, bureaucrats, industrialists and SME owners are following the same path...... Am not sure who will rescue the middle and por category citizens from the crony capitalism practiced by these so called ELITES !!

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chetan

Mar 17, 2012

I agree with the points mentioned, and may I add, in a good society, positive (long term) behavior is rewarded in the long term. The fear of punishment seems to have disappeared in modern times, as societies become immense and impersonal and people mobile across borders. The solution lies in increasing individual accountability (joint and several) for group actions.

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